Wolverhampton IFA Andrew Clothier found that his client had been mislabelled as missing a mortgage payment when she had taken a mortgage payment holiday.
The IFA is unable to pinpoint if blame for the problem lies with the client’s original lender Halifax or the new lender Woolwich but he says that the system can work against the customer.
Halifax press spokesman Paul Fincham says the company would not comment on Clothier’s case or how the mistake could have happened. But he suggests that an adviser should ask clients to check their credit background and, if there is a problem, to request a notice of correction from the credit-checking agency to be placed on file.
It is not generally standard procedure for mortgage advi-sers to ask for a credit-check if the client has no history of poor credit or missed financial payments. Clothier says he had established that his client had an A1 credit rating and there was no need to run a credit-check before applying for the new mortgage.
At Nationwide, all the mortgages are flexible and customers can take payment holidays, with prior agreement and subject to eligibility.
Nationwide explains that it shares all data, both positive and negative with a credit reference agency. It says it relies on sharing data to help it make lending decisions. If a customer takes a payment holiday the systems are changed so the customer will make 0 payments for the agreed period. The borrower then makes no payments and in effect pays the amount Nationwide expects. The customer meets their payments and so no negative data is passed to the credit-referencing agencies.
But for Clothier’s client and perhaps for many more in the UK, the system got it wrong. To restore his client’s reputation and confirm with Woolwich that an error had been made, the process took 44 days. He says: “It was lucky there was not a property being bought, otherwise my client would certainly have lost it.”
National Consumer Council senior press offices Janice Allen says: “How do we know that this is a one-off? Is it one occasion or is it endemic? This raises questions as to how IT systems cope with information and to what extent that we rely on them.”
Allen added that with the change in IT systems due to mortgage regulation and the recent rise in flexible mortgage options, there could be the potential for similar problems to occur. Her advice to consumers and advisers is to check their credit rating before applying for a mortgage.
Credit reference agency Experian consumer affairs manager James Jones says: “It makes sense for a client to check their credit rating first to avoid running into problems with the lender down the line.”
Experian claims it sent out one million credit reports last year and that 95 per cent contained up-to-date information.
But this suggests that 50,000 reports did not contain accurate information last year.
The agencies rely on data to be passed on by lenders and banks.
Clothier says: “It is not just mortgage applications that can be affected, our ability to obtain other types of credit could potentially suffer – credit cards, hire purchase on the car, bank personal loan, and even TV or phone rentals.”
Mortgage Advice Bureau mortgage adviser Brian Murphy suggests that if there are any concerns with a client’s credit history, a credit-check should be made but he warns that sometimes it can take up to eight weeks to get a hard copy.
Murphy says there are grounds for concern, especially with the changes that lenders are making to their systems for mortgage compliance. He says: “There are situations where product devel- opment has succeeded IT development. Lenders are, in many circumstances, using existing IT support systems that tend not to have the feature capacity demanded.”
Mortgage Portfolio mortgage broker Simon Chalk has similar concerns. In a mortgage market where flexible features are increasingly desirable, he says it is understandable how errors can arise.
Abbey has withdrawn three of its flexible mortgage products due to IT complications. It says the changes to its systems mean more information from potential mortgage customers has to be collated. Due to the more complex nature of flexible mortgages, the products had to be withdrawn as a precautionary measure.
Chalk says: “Like any commercial beast, driven by sales and marketing, features are devised with all kinds of bells and whistles. We saw this in the pension market and in particular with pension draw-down. Features were intro- duced but the systems were not created to deal with them.”